Rössing On ‘Life Support’

RIO Tinto’s Roumlssing Uranium mine will depend on existing long-term contracts for survival until the end of 2017, but if uranium spot prices do not go above a sustainable U$45 per pound by then, the mine will be in “trouble” after that, Roumlssing’s Managing Director Werner Duvenhage has said.

This was part of a bleak medium-term forecast for one of the biggest uranium mines in the world, and although optimism remains about the future of uranium, a decision had to be taken now to ensure the mine survives until better days.

Duvenhage said the latest restructuring will result in about 200 workers losing their jobs as from 1 August. The emergency measures had to be taken because spot prices continue to fall and current stand at U$28 per pound, which has been the lowest in decades.

According to Duvenhage, for every U$5 per pound drop in the price, Roumlssing will earn N$300 million less for the year.

“Roumlssing is facing aerse business conditions. The restructuring is to keep the company operating to avoid care and maintenance or closure. Although we have focused hard on reducing costs since 2012, which has kept us in business so far, we now have to review our business operations to find

ways to further reduce costs,” he said at a press conference at Swakopmund yesterday.

The restructuring, which will be implemented on 1 August, will see the mine only producing sufficient quantities to supply to existing long-term contracts.

According to Duvenhage, long-term contracts have significant price premiums on spot prices, with the official long-term price being U$45 per pound. This decision, he said, will make Roumlssing “insensitive” to further spot price reductions but will still keep options open in the event that spot prices increase significantly.

“There will be no complete shutdown due to these contracts. A drop in spot prices will not affect us,” Duvenhage said, but added that this dependence on long term contracts will be until end 2017.

Besides the redundancy of 265 job roles, the plan will also see a reduction in the working cycle from 247 to a five-day operating cycle. As a result, annual production capacity will be halved from 4 000 tonnes to 2 000 tonnes of uranium oxide. In fact, for the whole of June, the mine will completely shut down only maintenance work will be done until operations start again in July.

Other restructuring elements will include revised mining and milling targets, annual leave plans to reduce the impact of public holidays and a number of other measures to improve efficiency and reduce costs sustainably.

It is hoped that the plan will cut about N$1 billion from fixed operating costs, but still leaves a shortfall of about N$90 million – hence the necessity to cut the workforce by about 200 workers, which will bring the number of employees down to 930. That means the workforce will be reduced by about 22% and according to Duvenhage, in addition, existing contractors will also be reduced by the same figure.

He said the other 65 job roles are currently vacant, and will not result in anyone losing their job it just means that those positions will not be filled.

Duvenhage said consultations with the Mineworkers Union of Namibia (MUN) has been on going but attempts to reach Ismael Kasuto, president of the union, were unsuccessful.

Last month, at the release of the mine’s 2013 report to stakeholders, Roumlssing showed that it managed to break even in the 2013 financial year recording a profit of N$32 million. The company had made losses in 2010, 2011 and 2012.

According to Duvenhage, the savings of more than N$300 million was due to a wide range of cost reduction activities across the mine that were implemented in 2012, and which also saw the retrenchment of 276 workers.

Source : The Namibian